GGRAsia – Macau Legend narrows loss in 1H, breaches covenants

Macau Legend narrows loss in 1H, breaches covenants

Sep 02, 2024 Newsdesk Latest News, Macau, Top of the deck

Gaming and hotel services firm Macau Legend Development Ltd reported revenue of HKD390.4 million (US$50.1 million) for the first half of 2024, up 16.5 percent from the prior-year period.

The company posted a net loss of just above HKD109.9 million for the six months to June 30, compared with a HKD182.5-million loss a year earlier, according to a Friday filing.

The Hong Kong-listed firm has business linked to one casino in Macau – Legend Palace (pictured) – under a so-called services agreement with Macau licensee SJM Holdings Ltd.

Macau Legend owns a tourism complex called Macau Fisherman’s Wharf, a waterfront area close to the Outer Harbour Ferry Terminal on Macau peninsula, and where Legend Palace is located.

Macau Legend reported adjusted earnings before interest, taxation, depreciation, and amortisation (EBITDA) from continuing operations of about HKD85.3 million for the first six months this year, compared with HKD52.2 million a year ago.

In May, the company completed the disposal of its Laos casino resort, Savan Legend Resorts in Savannakhet, Laos. In Friday’s filing, Macau Legend said it recorded a profit of HKD75.0 million from the discontinued operation during the reporting period.

“The group decided to cease its business operation in Laos in order to centralise and reallocate its resources to its business operation in Macau and future development,” it stated.

The firm added: “Both the increase in adjusted EBITDA from continuing operations and the narrowing of loss for the period were mainly attributable to the increase in adjusted EBITDA generated from the gaming services provided in the Legend Palace Casino.”

In first-half 2024, total reported revenue for gaming services rose by 43.7 percent year-on-year, to circa HKD208.5 million. Adjusted EBITDA in the gaming segment stood at HKD65.5 million in the six months to June 30, compared with HKD33.3 million a year earlier.

The company recorded non-gaming revenue of HKD181.9 million in the first six months of 2024, down 4.2 percent year-on-year. Adjusted EBITDA in the segment stood at nearly HKD25.0 million, compared with HKD28.7 million a year ago.

Breach of covenants

In its latest filing, Macau Legend said it had net current liabilities of circa HKD2.50 billion as of June 30.

The group’s total bank and other borrowings amounted to nearly HKD2.41 billion, “which will be due for repayment within the next 12 months from the end of the reporting period or are repayable on demand, included an instalment of loan principal amounting to HKD135.0 million due in September
2024”.

The firm’s cash and cash equivalents amounted to HKD65.1 million as of June 30.

Macau Legend said that during the reporting period one of its subsidiaries “failed to comply with certain loan covenants” for one of the group’s bank borrowings, regarding the arrangement of disposal proceeds following the disposal of the business in Laos, “which in turn triggered the non-compliance of a covenant of the group’s other bank borrowing”.

As a result, bank borrowings of nearly HKD1.90 billion – with original maturity date of over one year from the end of the reporting period – have been reclassified to current liabilities and all the group’s bank loans of HKD2.07 billion “become immediately repayable if demanded by the banks”.

“The management has been holding ongoing discussions with the banks for an amicable solution in respect of the non-compliance of loan covenants and extension of repayment date of the aforesaid instalment of loan principal due in September 2024,” the company stated.

But it added: “Up to the date of approval of the interim condensed consolidated financial information, notwithstanding that the group has not received any demand for immediate repayment of the group’s bank borrowings from the banks … the group does not currently have sufficient financial resources to fulfil its obligation of the instalment of loan principal of HKD135.0 million due in September 2024.”

“There exist circumstances that cast significant doubt on the group’s ability to continue as a going concern,” it noted.